4 Key Steps to Succession Planning
Eighty million Baby Boomers are preparing to retire over the next decade. As a consequence, corporations will need to radically adjust their workforce planning and succession management strategies. Yet, in a recent Heidrick & Struggles survey of 140 CEOs and Boards of Directors from both public and private organizations, more than half could not name an immediate successor to the CEO.
This problem tends to be even more pervasive in small to mid-size businesses, as many do not have succession plans in place. According to a 2010 article “Exit Planning for Business Owners” (www.mfrtech.com), it is estimated that up to 85% of small business owners have no exit strategy. Further, a 2010 survey from the U.S. Small Business Association suggests that only 30% of small businesses survive to the next generation.
Establishing a game plan to manage executive succession in smaller and family-owned businesses is just as important as establishing a strategic business plan. Yet, many of these businesses are unprepared to fill key executive vacancies. Reasons for this vary, including having a limited pool of qualified internal candidates, poor advice from key advisors, and a reluctance (and in some cases denial) of chief executives to acknowledge their “impending mortality.”
Further, given current economic realities, most small businesses are trying to do more with fewer employees and “keeping the lights on” takes precedent over succession planning. However, as the research suggests, failing to address succession needs can have dire consequences on the sustainability of a business.
To lay the foundation for effective succession and transitional planning, there are a few critical steps businesses should take to help preserve organizational and leadership continuity:
1. Ensure succession management is “owned at the top”
Without executive sponsorship, most succession strategies fail to get off the launch pad. The CEO must act as communicator, owner and role model for the process. He or she must develop a business case for succession planning, which is aimed at supporting the vision and longer-term plan for the business.
2. Identify “key positions”
This step entails an assessment of target or “at risk” roles that are required to execute the business strategy. Each position must be defined in terms of the knowledge, leadership skills and experiences required to meet both current and future challenges.
3. Assess talent
It is critical the business apply a rigorous assessment process to determine whether they have internal, high-potential candidates. If not, an aggressive strategy for sourcing and assessing qualified external candidates will be required.
4. Accelerate successor development
To prepare for both planned and unplanned vacancies, businesses should invest to accelerate the readiness of internal candidates to take on increased responsibility. This can include the use of executive coaches, internal and external mentors, and special assignments or strategic projects.
Developing and implementing succession strategies in smaller and family-owned businesses can be a daunting, and at times, emotional process. Enlisting the help of an external partner can provide a business with the objectivity and expertise to build the appropriate structure to support the survival of the business through a critical transition. Given the amount of effort that goes toward ensuring a business’ day-to-day performance, it follows that sufficient time and effort should be devoted to planning for its leadership and organizational continuity.